Joint Comment Letter to IRS on Notice 2020-42, Remote Notarization

Internal Revenue Service

Attn: CC:PA:LPD:PR (Notice 2021-03)

Room 5203

P.O. Box 7604

Ben Franklin Station Washington, DC 20044

Re: Permanent Relief for Remote Witnessing Procedures

In response to the request for comments included in Notice 2021-03, the undersigned organizations write to reiterate our request for the Internal Revenue Service (“Service”) to make permanent its temporary relief from the physical presence requirement for spousal consents, as originally announced in Notice 2020-42 and extended by Notice 2021-03. We were extremely pleased to see Commissioner Charles Rettig express his strong support for this in his testimony during the March 18, 2021 hearing of the House Ways and Means Committee.

Last fall, through our enclosed letter dated October 1, 2020, the undersigned organizations urged the Service to make permanent its temporary remote witnessing rules for spousal consents or, at a minimum, extend that relief through the end of the pandemic. The undersigned organizations very much appreciate the six-month extension already announced by the Service through Notice 2021-03.

Nevertheless, the Service’s temporary relief is set to expire on June 30, 2021, notwithstanding the fact that it has made the spousal consent process more secure and more convenient for interested stakeholders. Based on these demonstrated benefits, the Service should make its remote witnessing rules permanent and, without delay, announce a permanent extension of the relief described in Notice 2020-42 and Notice 2021-03. If the Service believes that, as part of a regulatory amendment, additional requirements may be appropriate for remote witnessing, we believe it would be appropriate to consider those additional conditions as part of a notice and comment rulemaking. In the meantime, however, the Service should not permit its current relief to expire.

Permanent Relief Is Warranted Based on Additional Security and Convenience

Remote witnessing has worked well during the pandemic and allowed retirement plan participants to access their benefits without unnecessarily jeopardizing their health by physically meeting with a notary public or plan representative. These personal and public health benefits, however, have not been the only benefits resulting from the use of remote witnessing.

Specifically, remote witnessing has proven, under the Service’s temporary relief, to be more secure and more convenient than physical witnessing.

Security.Remote witnessing creates a more secure environment for spousal consents than physical witnessing. Just like physical witnessing, remote witnessing provides real-time third-party identity verification by visually comparing a person’s face with a valid photo ID indicating that the person is who they claim to be. However, unlike most physical witnessing, remote witnessing can also easily be recorded and create an electronic audit trail. Additionally, in the case of plans that use a remote online notarization service, plan sponsors can incorporate dynamic knowledge-based-authentication standards that cannot be easily incorporated into a physical witnessing process. Under these circumstances, not only is remote witnessing as secure as physical witnessing, it is more secure because of these additional layers of protection. For example, one large plan service provider reported that, over the past year, its clients have used remote notarization over 7,000 times. Another large provider reported they had just about reached 7,000 remote notarizations through the end of March. These providers are aware of no incidents of fraud.

Convenience.Remote witnessing is also undoubtedly a more convenient alternative to physical witnessing for those participants who are comfortable using face-to-face online video communications tools. Companies that have made remote witnessing available during the pandemic have consistently found that their customers appreciate the additional convenience made possible through remote witnessing options. Moreover, companies incorporating remote witnessing have found that it offers a quick and secure alternative to conventional physical witnessing. According to one company who has adopted remote notarization for spousal consents, the average remote notary session takes less than eight minutes from start to finish.

Commissioner Support for Remote Witnessing.Not only have retirement plan sponsors and service providers recognized the additional security and convenience created by remote witnessing procedures, these benefits have also been acknowledged and supported by the current Commissioner of Internal Revenue. During a March 18, 2021 hearing of the House Ways and Means Committee, the Commissioner of Internal Revenue, Charles Rettig, expressed his strong support for the permanent extension of the Service’s remote witnessing rules. Specifically, when asked about the use of remote online notarization during the pandemic, Commissioner Rettig said that he was a “huge advocate” for making these rules permanent and expressed his belief that remote notarization is a service that taxpayers “deserve.” Commissioner Rettig also stated that he was not aware of any issues that would cause the Service to not make its relief permanent.

The Service Should Honor State Notarial Standards

The undersigned organizations believe that the Service should make its remote witnessing rules permanently available in alignment with state notarial standards. That is, to the extent that a state’s notarial rules allow for remote online notarizations, the Service should recognize those standards as satisfying any notarial standards required by the Internal Revenue Code or any regulations thereunder.

As of this writing, 31 states have enacted permanent remote notarization rules and additional states are actively considering similar measures. This nationwide trend, which appropriately recognizes the appropriateness and effectiveness of remote online notarizations, has only accelerated because of the ongoing pandemic. Therefore, upsetting all of these rules at this time would create unnecessary chaos. We are not asking the Service to require any state to adoptparticular standards, only that the Service not disregard these state-level standards and permit the use of remote notarization in any case in which a notarization would be recognized as valid under applicable state law.

Permanent Relief Does Not Require Regulatory Amendments

Notice 2021-03 states that “Any permanent modification of the physical presence requirement in

§ 1.401(a)-21(d)(6)(i) would be made through the regulatory process that is subject to notice and comment.” The undersigned organizations agree that any amendment to the relevant regulations will require a notice and comment rulemaking. We do not, however, believe that such a process is required to provide the permanent relief that we are requesting.

The applicable Treasury regulations permit the Service to make available permanent relief from the physical presence requirement, without notice and comment rulemaking, if the Commissioner publishes guidance in the Internal Revenue Bulletin describing procedures that are deemed to satisfy the physical presence requirement, provided that those procedures provide the “same safeguards for participant elections as are provided through the physical presence requirement.” Treas. Reg. § 1.401(a)-21(d)(6)(iii). As discussed above, not only do the remote witnessing procedures discussed in Notice 2020-42 and Notice 2021-03 provide the same safeguards as physical witnessing, because of electronic recording, electronic audit trails, and additional authentication methods, in many ways, remote witnessing offers procedures that are more protective than conventional physical witnessing.

Based on the authority provided to the Commissioner through Treas. Reg. § 1.401(a)- 21(d)(6)(iii), the Service should announce a permanent extension of the remote witnessing rules described in Notice 2020-42 and Notice 2021-03 by publishing such guidance in the Internal Revenue Bulletin. We presume that the Service believed that it could initially announce its temporary relief in reliance on this noted authority and, in reliance on that same authority, it should announce a permanent extension of its temporary relief. If the Service believes that, as part of a regulatory amendment, additional requirements may be appropriate for remote witnessing, we believe it would be appropriate to consider those additional conditions as part of a notice and comment rulemaking. In the meantime, however, the Service should not permit its current relief to expire.

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Thank you for your consideration. Please do not hesitate to contact any of the undersigned organizations if you have any questions.

American Bankers Association

American Benefits Council

American Council of Life Insurers

American Financial Services Association

American Retirement Association

Committee of Annuity Insurers

The ERISA Industry Committee

Financial Services Institute

Finseca

Insured Retirement Institute

Investment Company Institute

National Association of Insurance and Financial Advisors

Retirement Industry Trust Association

Securities Industry and Financial Markets Association

Small Business Council of America

The SPARK Institute

U.S. Chamber of Commerce

• October 1, 2020 Letter Requesting Permanent Relief

Cc:

• Sunita Lough, Commissioner of Tax Exempt and Governmental Entities
• Carol Weiser, Benefits Tax Counsel
• Rachel Levy, Associate Chief Counsel
• Stephen Tackney, Deputy Associate Chief Counsel
• Pamela Kinard, Office of the Associate Chief Counsel